Kansas State University
Sustainability
Thoughts from the corporate sector:
Coca-Cola’s example
Michael Stopford
Group Director, Corporate Reputation
The Coca-Cola Company
Scope
• Reputation and expectations
• Sustainability and the business
• Sustainable agriculture
2
Coca-Cola History: 120 Years of Innovation
In 1886, John Pemberton created
Coca-Cola in Atlanta, Georgia
Contour
bottle
Coca-Cola
introduced
1886
1889
1916
1st coin-operated • 1st 12-ounce can
vending machine • Sprite introduced
1923
1935
1955
1960
Coca-Cola bottling
First sales of
Family-size bottle
system is started Coca-Cola in 6-packs
introduced
3
1982
Launch of
Vanilla Coke
2002
Introduction of
Diet Coke
Introduction of
Coca-Cola Zero,
Coca-Cola Blak
and Enviga
2003 2006
2007
Introduction Vitamin
of Dasani
Water
A Global System
4
North America
Latin America
Europe, Eurasia & Middle East
Asia
Africa
Reputation
A Classical Tradition
“ Regard your good name as the richest jewel you can
possibly be possessed of - for credit is like fire; when
once you have kindled it you may easily preserve it, but
if you once extinguish it, you will find it an arduous
task to rekindle it again.
The way to gain a good reputation is to endeavor to be
what you desire to appear.”
-- Socrates
“Sustainability and commitment to corporate responsibility contribute
to reputation and help support the strength of our brands."
-- Coca-Cola CSO
5
Reputation is Performance – Not Spin…
WEBSTER’S DEFINITION:
rep·u·ta·tion – noun
Overall quality or character as seen or judged by people in general; a
place in public esteem or regard
• Reputation is driven by:
– Your overall quality or character
– How people judge it, and in what esteem or regard they hold it
• In other words, reputation is a combination of two factors….
• Our Secret Formula: Performance + Perception = Reputation
6
Exposed Consumer Sector
8000
Pharmaceuticals
Positive news (ethical offers)_
7000
6000
5000
Food &
Beverage
Technology
Hardware
4000
Banks
3000
Automobiles
Retailers
2000
Oil & Gas
Mining &
Metals
Chemicals
Entertainment
& Leisure
1000
0
0
1000
2000
3000
4000
5000
6000
7000
8000
Negative news (ethical demands)
The Food & Beverage industry registers the second
amount of positive and of negative news
7
Food & Beverage Industry report 2006
www.covalence.ch | info@covalence.ch
Products Would Most Like to See
Become More Responsible
Unprompted, Combined Mentions, Average of 18 Countries,* 2005
Ethical Consumerism
* Not asked in France,
Nigeria, and Switzerland
8
Industry Global News Leader 2001-2006
Coca-Cola registers the most positive news
within 18 Food & Beverage companies,
followed by Unilever and Nestlé
9
Coca-Cola Report August 2007 update
info@covalence.ch | www.covalence.ch |www.ethicalquote.com
…Continues 2007
Food & Beverage Industry: January 2007 to August 2007
1300
1200
Coca-Cola
Positive news (ethical offers)
1100
1000
Unilever
900
800
Starbucks
700
Nestlé
600
500
PepsiCo
400
300
Kraft
Diageo
200Kellogg Danone
Cadbury
SABMiller Heineken
100Hershey Sara Lee
Heinz ADM
0 Numico
0
100 200
300 400 500 600
700 800 900 1000 1100 1200 1300
Negative news (ethical demands)
From January to August 2007, Coca-Cola’s white arrow is
the largest, meaning it registered the highest volume of
information – both positives and negatives
10 Coca-Cola Report August 2007 update
info@covalence.ch | www.covalence.ch |www.ethicalquote.com
A Complex Landscape of Global Issues
Measure, Report,
Connect, Recognize
ENVIRONMENT
WORKPLACE
Child
Labor
Sustainable
Packaging
Climate Change/
Energy
Human
Rights
Development
Water
HIV/AIDS
COMMUNITY
11
Labor Relations
& Workplace
Accountability
Responsible
Supply
Agriculture
Globalization
Wellness
MARKETPLACE
Expectations: Myriad Stakeholders
PROVIDERS
OF CAPITAL Shareholders/
Legislators
Analysts
Banks
Competitors
GOVERNMENT
Regulators
Multilateral
agencies
Local
government
Consumers
Trade Associations
Customers
Media
BUSINESS
Suppliers/
Dealers
NGOs/
activists
Employees/
Church
Unions
groups
Partners
& JV’s
Schools/
Scientists
universities/
Nutritionists
academics
Community
12
INTEREST
GROUPS
Expectations: Social and Environmental Action
“ 89% of consumers believe that corporate obligations to
shareholders must be balanced by contributions to the broader
public good…
Asked to select the three issues that would be most important to
them over the next five years, almost half of the consumers
picked environmental issues… followed by pensions and other
retirement benefits, and health care…”
-- McKinsey Quarterly 2007 Number 2
Consumers polled in US, UK, China, India,
France, Germany Japan
“ Customers – both consumer and business customers – want
green heroes… companies they believe are setting the pace…”
-- Joel Makower
“The guru of green business” - Associated Press
13
Expectations: 2007 Global Trust in Institutions
Relative Trust in Institutions
North America
E.U.
NGOs
RELIGIOUS
BUSINESS
MEDIA
GOVERNMENT
57%
53%
52%
NGOs
BUSINESS
RELIGIOUS
MEDIA
42%
38%
GOVERNMENT
Asia
BUSINESS
MEDIA
GOVERNMENT
NGOs
RELIGIOUS 39%
Latin America
BUSINESS
NGOs
MEDIA
RELIGIOUS
GOVERNMENT
68%
64%
62%
55%
37%
I’m going to read you a list of institutions. For each one, please tell me how much you TRUST that institution to do
what is right. Please use a 9-point scale where 1 means that you do not trust them at all and 9 means that you trust
them a great deal. (Top 4 boxes shown)
14 Source: Edelman Annual Trust Barometer, Jan 06
60%
55%
55%
53%
Expectations: Issues Global Companies Should Address
Human Rights 57%
Global Warming 42%
Global Warming 77%
Poverty 59%
Poverty 66%
Human Rights 44%
Poverty 63%
Human Rights 62%
Global Warming63%
Human Rights 63%
Poverty 53%
Security 50%
Global Warming 85%
Poverty 65%
Which are the most important issues that global
companies you trust should address?
15 Source: Edelman Annual Trust Barometer, Jan 06
Global
Warming 79%
Poverty 57%
Expectations: Corporate Citizenship
For the first time ever,
consumers said that a
company’s corporate
citizenship activities
influenced their view of the
company’s reputation more
than the company’s
products or services.
-- Reputation Institute
16
Expectations: Tomorrow’s Leaders…
• It’s not enough to simply satisfy
rational basics like “quality” or
deliver emotional promises such
as “fits my lifestyle”
• Today consumers ask how
brands can help them
consume whilst reducing any
negative impact
• Tomorrow consumers will
choose brands that also
actively help them have an
additional positive impact
through consuming
17
Expectations: Reputation Surveys
Fortune:
World's 50
Most Admired
Companies
Business Ethics
Harris
Reputation
Magazine/CRO:
Interactive/WS
Institute:
100 Best
J: Reputation
RepTrak Pulse
Quotient
Key Attributes
1: Innovation
2: Leadership/Management
3: Community Responsibility
4: Environmental
Responsibility
5: Quality Products/Processes
6: Financial Performance
7: Workplace
8: Good Governance
Color Coding:
18
Covered
Not Covered
Corporate
Citizens
United States
Reputation
Institute:
Global
RepTrak Pulse
Reputation Scorecard
Reputation Scorecard
Draft only
PERFORMANCE Data By Year
#
1
2
2005
2006
2006 Score
(Low,
Medium,
High)
PERCEPTION Data By Year
Category
Metric
Employee
Engagement and
Accountability
Employee engagement
Ethics & Compliance metric
3
Company facilities scoring Red
4
Non-Company facilities scoring Red
5
Workplace Rights
6
7
8
Water
9
Climate
10
Packaging
11
12
13
Diversity metric (TBD)
Workplace fatality rate
Water use ratio
Wastewater Treatment rate
Energy use ratio
Solid waste reuse rate
CSI as a percentage of pre-tax profits
Community
Engagement
14
Percentage of CSI aligned with priorities
Economic opportunity/impact metric
(TBD)
Sustainable agriculture metric (TBD)
15
Customer
Satisfaction
Customer satisfaction (TBD)
16
Innovation
Innovation (TBD)
17
18
19
20
19
Economic
Performance
Quality
Growth in economic profit
Market share
Percent increase in volume
Product quality metric
2007
PepsiCo
vs. TCCC
2006
Score
(Low,
Medium,
High)
Global
Relevance
(Low,
Medium,
High)
Local
Relevance
(Low,
Medium,
High)
Reputation Map
High Performance,
High Perception
Performance
High Performance,
Low Perception
Push
Leverage
Fix
Analyze
Low Performance,
Low Perception
Perception
20
Low Performance,
High Perception
Scope
• Reputation and expectations
• Sustainability and the business
• Sustainable agriculture
21
Green is Everywhere
22
Sustainability and Business
The glistening future that we had all believed we were working
toward, and that we could offer as a promise to our children,
appears to be evaporating like a shimmering mirage in the hot
desert sun. If the scientists are correct, and the evidence that they
are grows stronger each year, the climate crisis promises to be only
the second civilization-scale crisis we have ever faced. Only a
nuclear holocaust, also a man-made threat, presents the possibility
of such destruction.
In this new future, the most influential position in corporate America
could well be the chief sustainability officer
The corporate world has been a big part of the problem, and
it needs to be a big part of the solution
Forbes Magazine, January 2008
23
Sustainability and Business
A sustainable approach to business affects the bottom line in three
basic ways: It decreases operational and manufacturing costs
through better energy and resource management and waste
reduction; it increases revenue through developing and offering
new "green" products and technologies; and it increases profits by
developing positive P.R. and a stronger brand.
We need to identify opportunities to develop products, technologies,
and solutions for our customers to help them meet their
environmental goals while we meet ours. Office Depot
Because we are so global, and touch so many communities and so
many people around the world, we have a tremendous opportunity
to make a positive impact.
Jeff Seabright, Chief Environmental Officer, The Coca-Cola Company
Forbes Magazine, January 2008
24
Sustainability 3.0
The Evolving Conversation
Third Wave – “Race to the top”
•
•
•
•
focus on creating value
proactive and innovative
supply chain orientation
competitive differentiation
Second Wave – “Triple bottom line”
•
•
•
•
•
•
25
focus on efficiency and cost savings
managing externalities
stakeholder engagement
philanthropy
First Wave – “Do no harm”
•
reactive
•
focus on risks/compliance
•
public pressures to reduce negative impacts
Environmental Impact
Global Water Stewardship
Energy and
Climate Change
26
Sustainable
Packaging
Global Water Stewardship
Plant
Performance
Global
Awareness
and Action
27
Watershed
Protection
Supporting
Community
Initiatives
Sustainability Leadership:
Commitment To Water Stewardship
Water stewardship makes sense for Coca-Cola:
Long term
 It matters to the global development agenda: an
imperiled water supply (both in availability and
quality) is a key emerging issue with long-term
implications.
Performance and product based
 It has a clear connection to TCCC’s products and
processes.
 TCCC is in a position to have a real impact both in
terms of its global reach and its presence on the
ground in local communities.
Partnership platform
 So: flagship platform
 Flagship partnership (next slide)
28
Environmental Performance
29
&
Partnership Workstreams
1. Plant Performance & Efficiency: all plants participate, setting
goals on efficiency and stewardship
2. Supply Chain Water Stewardship: initial focus on sugar
suppliers we all share
3. Improve watershed health and sustainability: in seven,
iconic river basins
4. Climate Change: all plants participate through
energy efficiency
5. Marketing and Communication: the leverage the reputational
benefits and inspire action
River Basins
1. Yangtze: Underway with Swire
2. Mekong: Underway with TPDL and Sabco
3. Rio Grande/Rio Bravo: Planning stages with CCE and ARCA
4. Meso American Reef: water fund/payment for environmental
services in Central America
5. Southeast US Rivers: smart development model with United,
Consolidated and CCE
6. East Africa: Plans to engage SAB/Miller Q2 2007
7. Danube: CCHBC engaged June 13
30
… linking the most
powerful brands in
conservation and
commercial
products.
WWF – Coca-Cola Partnership
31
Impact of Water Stewardship Work and Partnership
WWF partnership to improve global water consumption
UN Global Compact Leaders Summit & 21-point Geneva Declaration
Sustainable water supplies and water saving initiatives
Efforts to combat climate change and reduce carbon footprint
UN Global Compact
UN Global Compact Leaders Summit & CEO Water Mandate
Reduction in packaging and recycled plastic for packaging
Coca-Cola's foundation donations towards education
Water-purification systems for the poor (Kenya)
USAID partnership to address water shortage in Africa
UN-HABITAT and public-private community partnerships
Global nutrition standards for the products it markets to children
Company agrees to rid cancer-causing benzene from soft drinks
Companies address childhood obesity
Charitable donations and sponsorships
Scholarships
HIV/AIDS workplace or community programs
Effluent (water) treatment plants (ETPs) benefit fish farming
CSR information or report
Environmental Impact of Production shows the most important
increase in the share of positive news. Coca-Cola has been given
credit for its partnership with WWF to conserve global water
consumption along with other sustainable water initiatives.
32 Coca-Cola Report August 2007 update
info@covalence.ch | www.covalence.ch |www.ethicalquote.com
Social Performance
The uniqueness (and simplicity) of the Coca-Cola business system enables
us to have a sustainable positive impact on local economic development
and entrepreneurship.
• Non-alcoholic beverages contribute to economic growth & increase local
government revenues
• Indirect multiplier effect of the Coca-Cola business system is even greater
• Our system stimulates entrepreneurial activity for countless retailers, SMEs
worldwide
• The Coca-Cola system is the largest private employer on the African Continent
providing 60,000 direct jobs + hundreds of thousands more indirectly
• In the Philippines, a person who buys an 8-oz. bottle of Coca-Cola for eight pesos
(US$.14) helps generate 17.60 pesos (US$.30) of additional output in the economy
• Brazil, Bolivia, Argentina: between 5 and 10 jobs created for every Coca-Cola
system job
• Localized production emphasizes good corporate citizenship
33
Scope
• Reputation and expectations
• Sustainability and the business
• Sustainable agriculture
34
Agriculture at the Center of the Sustainability
Challenge
Agriculture’s mandate
Agriculture’s footprint
•
Global food demand will double in next 50 years.
•
Increased incomes (+240% by 2050) will
increase quantity and intensity of food
production.
contributes 25-40% of all GHG emissions
•
Per capita arable land/person is shrinking.
•
uses 55% of all habitable land (and growing).
•
leading source of pollution in many regions
•
Agricultural energy sources – Biofuels - are
competing for access to land and labor.
•
causes 95% of all soil erosion; half of the world's
topsoil has been lost due to unsustainable farming
practices
•
The poor have no land, spend up to 75% of
income for food, and still go hungry
•
accounts for 70% of all child labor (150MM) - in
some countries child labor comprises 1/3 of
agricultural workforce.
•
Agriculture is the catalyst and foundation of
development
•
Increased demand for bio-fuels combined with
reduced crop surpluses and a decline in export
subsidies are causing fundamental changes to
agricultural markets and raising commodity
prices.
•
50% of world's assets, consumer expenditure, and
jobs belong to the food system
•
accounts for 70% human water use (>60%
wasted).
•
•
one of the three most hazardous work sectors, in
terms of work-related deaths and injuries.
More environmental impact than any
other human activity
35
Growing demand
on a finite planet
Food Production has Largest Ecological
Footprint per $
36
Sustainable Agricultural Supply Chain
Value Chain
Sustainability
Challenges
Agricultural
Production on
large or small
plantations
Sale of
commodities at
local, national
& international
levels
Manufacturing
& packaging of
food &
beverage
products
Marketing,
retail &
consumption
Sustainable
Agriculture
Many Stakeholders
Focus on the Impacts of
Sustainable Agriculture
Ethical
Trade
Food
Safety
Nutrition,
lifestyle
& marketing
37 Chart from: IBLF’s Food for thought, CSR for food & beverage manufacturers report, 2002
Issues Along the Supply Chain
Farm
Transport
Retail
Consumer
• Agrochemicals
• Energy use
• Food miles
• Food quality
• Health & nutrition
• GMOs
• GHG emissions
• Energy use
• Food safety
• Habitat conversion
• Air pollution (other
emissions)
• Fuel choice
• Consumer labeling,
transparency
• Additives (flavors,
preservatives,
colorings, etc.)
• Biodiversity
• Soil degradation
• Water use & efficiency
• Water pollution
• GHG emissions
• Air pollution (other
emissions)
• CC impacts
• Water use & efficiency
• Water pollution
• Packaging
• Land / soil pollution
• Solid waste (hazardous,
packaging, food byproducts, e.g.)
• Agricultural waste
• Employment
opportunities
• Pricing & trade
• Occupational H&S
• Human rights
• Training & dev.
• Labor rights
• Human rights
• Occupational H&S
• Labor rights
• Capacity building
• Freedom of assoc.
• Land tenure
38
Manufacturing
• Mode of transport
• Storage & facilities
(including
refrigeration)
• Labor rights
• Freedom of assoc.
• Price & access
• Responsible market
creation
• Transparency
SA Issues and Stakeholders
Consumer
transparency
Type of response
Consolidation
Labor /
human rights
Food quality
& safety
Climate
change
Biofuels
Water
Food
aid
Risk
Management
Land
rights
Biodiversity
loss
Subsidies
Chemicals
Local
sourcing
Influence
Soil
degradation
NGOs
Habitat
conversion
International NGOs
Opinion Formers
Stakeholder interest
39
Media
Regulators
What is Sustainable Agriculture?
Sustainable Agriculture:
– “Agriculture is sustainable when it is ecologically
sound, economically viable, socially just, culturally
appropriate and based on a holistic scientific
approach.”*
• Agricultural supply chains that meet the needs of
people, industry, and nature in ways that do not
compromise future generations’ ability to do the
same.
*
From NGO Sustainable Agriculture Treaty, Global Forum at Rio de Janeiro, June 1-15, 1992.
Available at Information Habitat Website (8/99): http://www.infohabitat.org/treaties/]
40
Scope of TCCC’s global agricultural supply chain
Citrus - #3
Coffee - #5
41
Sugar - #1
Corn
Caramel
Tea - #2
Coca-Cola is in the Food Business...
Vending Machines & Coolers
Ingredients & Bulk
Packaging
Bottling
Plants
Concentrate
Plants
Ingredients &
Packaging
42
Warehouse
Transport
Consumers
Customers
And our Portfolio is changing…
… together with our agricultural profile
43
Stakeholders are increasingly focused on SA Issues
Water consumption & pollution
Food quality & safety (incl GMOs)
Consumer rights & information
Climate change & energy use
Labor standards & human rights
Habitat conversion
Biofuels
Media
Investor
NGO
Agricultural subsidies
Local sourcing & food miles
Biodiversity
Food aid
Soil degradation & erosion
Land rights
Envir & worker health
LOW
44
Level of interest
HIGH
… Issues with financial and reputational impacts
Water
Food quality & safety
Labor & human rights
Consumer information
Chemicals
Subsidies
Local sourcing
Biofuels
Climate change
Food aid
Soil
Land rights
Habitats
Biodiversity
45
Financial
Reputational
Supply Chains targeted
And ??
46
Trend to multi-stakeholder partnerships
While initially companies and NGOs focused on standards and certifications, in recent years the
focus has turned to more holistic approaches with an emphasis on capacity-building, industry and
NGO partnerships and broader product-specific commitments
2007: Unilever commits to
sourcing all of its tea from
sustainable sources;
Sainsbury’s commits to 100%
Fairtrade bananas
Holistic approach
2006: Wal-Mart adds
environmental standards to
Supplier Standards
2005: Coke joins Better Sugar Initiative
and enters into water conservation
partnership with WWF
1997: Fairtrade Labelling
Organizations Int’l founded
2002: Danone, Nestle, Unilever
form SAI Platform
1997: Unilever founds Marine
Stewardship Council with WWF
Mid-1990s: Chiquita commits to full
Rainforest Alliance certification of its
bananas (achieved in 2000)
1992: Wal-Mart introduces Supplier
Standards for labor practices
Standards-based approach
2001: McDonald’s Europe launches
Agricultural Assurance sustainable
supply chain management program
1997: Carrefour develops supplier
labor standards with the Int’l Federation
for Human Rights
Internal partners
Proposed
Sustainable Agriculture Working Group
Social/
Labor
Scientific/
Regulatory
Product
Quality
Environmental
Economic/
Supply
Chain
Policy &
Trade
Innovation &
Marketing
Water
Climate/
Carbon
Land/Soil
Resource
Productivity
EWR Focus
48
… so there must be cross-functional communication and decisionmaking.
External partners and projects
•
•
•
Sustainable Oranges
•
Premium
Brewed
Beverages
•
Better Sugarcane
Initiative
Sustainable
Agriculture
Initiative
Future Generation
Agriculture Initiative
•
El Salvador
Sugar & Labor
49
•
India Sugar Project
Moving forward
The Case of Sugar
• Context
– TCCC has made a commitment to improve sugar production
practices, benefiting farmers and the environment.
• Issues
Environmental
Social
Economic
Quality
high water use, biodiversity loss
widespread stakeholder engagement around child and slave
labor at farm level
TCCS is world’s largest sugar buyer
pesticides
• Proposed Approach
– Focus in key sugar-producing regions where risks and opportunities are
greatest (e.g. Africa/EU scenario)
– Establish better sugar production practices through field projects
50
– Work with WWF and other stakeholders (Sabco, SAB/Miller, Cargill, Tate &
Lyle) in the Better Sugar Initiative to disseminate BMPs.
Sustainability: healthy communities, healthy business
PORTFOLIO
PARTNERS
We are a local business in over 200 countries,
offering world class quality beverages starting
with Coca-Cola and extending through over 400
beverages that refresh, hydrate, nourish,
relax and energize.
Through constructive engagement and
partnerships with stakeholders, our company
will work effectively and cooperatively in
order to realize the opportunities before us.
PLANET
PROFIT
We’re working to be leaders in
responsible water use and replenishment
in our operations. We envision a world in
which our packaging is no longer seen as
waster, but as a valuable resource for
future use. The health of our business is
directly related to the health of the
environment.
The Coca-Cola Company seeks to create
maximum value for its shareowners
while generating environmental and
societal value as the largest and most
respected beverage company in the
world.
PEOPLE
We’re committed to world-class standards for fair
and dignified treatment of all the people who work
for The Coca-Cola Company. Our products are made
in communities where they’re consumed, providing
local employment to nearly 1 million people, as
well as adjacent business growth that creates
10 more jobs for each one in Coca-Cola.
51